Pound New Zealand Dollar (GBP/NZD) Exchange Rate Sinks as BoE Rate Cut Fears Rise

GBP/NZD Exchange Rate Falls as Dovish Carney Warns of Struggling UK Economy

The Pound New Zealand Dollar (GBP/NZD) exchange rate fell by -0.4% today, with the pair fluctuating around NZ$1.878.

The New Zealand Dollar (NZD) edged higher against the Pound (GBP) following yesterday’s speech by Bank of England (BoE) Governor Mark Carney, who prompted fears that the bank would cut interest rates in the next few months.

Mr Carney commented that effects of global trade tensions could stunt the UK’s economic growth. He also added that the bank had broadened its ‘rationales for action’ – a comment interpreted by many analysts as indicating imminent rate cuts from the BoE.

As a result this left Sterling traders feeling increasingly jittery today.

The ‘Kiwi’, meanwhile, rose against Sterling despite yesterday’s release of the NZ Global Dairy Trade price index figures, which showed a -0.4% dip in dairy prices.

Although this was the fourth consecutive dip in dairy prices, the rate of decline had eased.

Satish Ranchhod, a Senior Economist at New Zealand’s Westpac Bank, commented:

‘Slowing economic conditions in some of our key trading partner economies, including China and some European countries, signal headwinds for prices.’

Pound New Zealand Dollar Exchange Rate Sinks, UK Services PMI Nears Contraction Territory

The Pound (GBP) further weakened following today’s release of the UK Markit Services PMI figures for June. These narrowly avoided contraction territory, falling from 51.0 to 50.2.

Chris Williamson, a Chief Business Economist at IHS Markit, further raised concerns of a near-term BoE rate cut, saying:

‘The near-stagnation of the services sector in June is one of the worst performances seen over the past decade and comes on the heels of steep declines in both manufacturing and construction… The worsening picture will put further pressure on the [BoE] to add stimulus.’

Uncertainty over Brexit is also continuing to drag down the Pound.

Pan Pylas, an Economics Expert for Associated Press said:

‘Britain’s economy [is showing] alarming signs of a sharp slowdown, possibly even [a fall into] recession, as uncertainty over Brexit combines with a less benign global backdrop.’

Fears of a recession are beginning to weigh on UK  sentiment, putting downwards pressure on the GBP/NZD exchange rate today.

GBP/NZD Forecast: Sterling Losses Likely as Economic Gloom Increases

New Zealand Dollar (NZD) traders will be paying close attention to US-China trade developments for the rest of the week.

As doubts are beginning to return regarding the trade ‘truce’ between the two superpowers, any signs of tensions reigniting could dampen market confidence in the risk-averse ‘Kiwi’.

There are no UK or New Zealand economic data release due out tomorrow.

Sterling investors will instead be paying close attention to developments surrounding Brexit and the Tory leadership race.

The GBP/NZD exchange rate, however, could fall if the UK’s economic gloom increases, with any further talks of a recession likely to prove Pound-negative.

David Moore

Contact David Moore